Alberta's have-nots struggle to grow in oil sector's shadow

Claudia Cattaneo: With the big-spending oilpatch poaching their workers, driving up rents, monopolizing political attention and generally behaving like they own the place, Alberta's manufacturing, industrial and service enterprises have banded together to come up with strategies to stay strong

In the province where energy spending is booming, there are plenty of oil have-nots who are struggling. They include the manufacturing, industrial and service enterprises that fuel the other half of Alberta’s $187-billion economy and work hard to grow in the oil industry’s shadow.

But they’ve had enough.

With the big-spending oilpatch poaching their workers, driving up rents, monopolizing political attention and generally behaving like they own the place, the other half has formed its own group in Calgary — Calgary Business Diversity — to get more respect and come up with strategies to stay strong.

“We need to protect the second economy because it’s really important,” said Arlene Flock, the group’s founder and the president of Flagworks, a private Calgary-based company with 40 employees that manufactures and distributes flags and banners in Canada and the United States.

“[The non-energy sector] services Alberta, it provides goods for the oil and gas industry, and it keeps the economy going when oil prices crash,” Ms. Flock said. “It’s very important that we stay here and that we stay in business.”

Call it Alberta’s version of Dutch Disease, with added tension because of a provincial labour situation so tight that every body counts.

Alberta had the lowest unemployment rate in the country in September, Statistics Canada said Friday, or 4.4%, compared to 7.4% nationally. Meanwhile, its average weekly wages are the country’s highest — $1,094 in July, next to a national average of $906.

“We can pay a receptionist $30,000 and oil and gas will pay $50,000. So it’s very, very hard for us to keep staff,” Ms. Flock said.

Formed a year ago, the group has signed up 150 members, representing such diverse industries as construction material recycling and printing, each with revenue greater than $10-million a year. Collectively, they pull in $25-billion a year. To put it in perspective, Suncor Energy Inc., Canada’s largest oil and gas company, took in nearly $40-billion in revenue in 2011.

The group’s campaign moved into high gear this week, when members sat down for a boxed lunch with Mayor Naheed Nenshi at Gunnar Office Furnishings, an office furniture manufacturing company located in an industrial park in Calgary’s southeast, far from city hall and the Petroleum Club, but where parking is still free and dogs can come to work.

“This group honestly feels they don’t get enough political support,” Ms. Flock said. “Talking to the mayor is a start, and we need some answers.”

For example, they told the mayor that city hall needs to do its part to keep non-oil and gas companies competitive, such as by reducing red tape and taxes and giving local companies a hand when they bid for municipal work.

Mr.Nenshi outlined initiatives already under way and offered his support.

“It’s important for Calgary to be a good place to build a business,” he said.

Alberta’s economy is evenly split between the energy sector and everyone else.

The oil and gas sector fuels half the economy through direct jobs such as exploration and production, indirect activity such as services and support, and induced spending such as retail, said Ben Brunnen, chief economist at the Calgary Chamber of Commerce.

Despite repeated efforts over the decades to diversify the economy, Alberta has become even more dependent on cyclical oil and gas.

That dependence is reflected in the province’s image. Mr. Nenshi told the group that outsiders are often surprised that “the oilsands are not in downtown Calgary.”

Competition for labour is intense because of the huge requirements of energy mega projects. Labour shortages are a big concern of chamber members, Mr. Brunnen said.

“The reality is in Calgary and Alberta, with the unemployment rate where we are at right now, we are bound to see challenges from a hiring and retention perspective, and there is definitely going to be that movement upward based on the next best employment opportunity because employers are hiring,” Mr. Brunnen said.

Because so many non-oil and gas companies support the oilpatch, some are able to raise pay and pass on their costs. For example, it’s common for retail employees to earn $15 an hour, he said.

Mr. Brunner said employers can also keep up by offering more meaningful employment than that of the oil industry.

“Those things can go a long way,” he said. “The energy sector, while it’s profitable, is not necessarily the most engaging work for everybody.”

That’s what Gunnar, which grew from a garage operation to a staff of 70, has been offering.

“We have a really unique culture at Gunnar,” said Lucy Mrakawa, corporate vice-president. “We support careers and we are dog friendly — you can bring your dog to the office, and it creates a nice atmosphere, relative to working in a large conglomerate.”

Charles Daly, manager of business development at American Express, said group members came together to find a collective voice, get recognized and share solutions.